DEE Development Engineers IPO opens today: Should you subscribe to the issue

The initial public offering (IPO) of DEE Development Engineers opens for bidding on Wednesday, June 19 and can be subscribed until Friday, June 21. The company is selling its shares in the fixed price band of Rs 193-203 apiece and investors can apply for a minimum of 73 equity shares and its multiples thereafter.
 

DEE Development Engineers, founded in 1988, is an engineering company that provides specialized process piping solutions for oil and gas, power including nuclear, chemicals, and other process industries through engineering, procurement, and manufacturing, among others.
 

DEE Development Engineers is looking to raise a total of Rs 418.01 crore via IPO, which includes a fresh share sale of up to Rs 325 crore, while an offer-for-sale (OFS) of up to 45,82,000 equity shares by its promoter Krishan Lalit Bansal amounting to Rs 93.01 crore.
 

DEE Development Engineers intends to utilise the net proceeds from the Fresh Issue towards funding working capital requirements of the company; prepayment/repayment of all or a portion of certain outstanding borrowings availed by the company; and general corporate purposes. Net proceeds from the OFS shall go to the selling shareholder of the company.
 

Dee Development Engineers mobilised Rs 125.1 crore from anchor investors as it has allotted 61.63 lakh equity shares to 19 funds at Rs 203 apiece. Citigroup Global Markets Mauritius, Morgan Stanley Asia (Singapore) Pte, Aurigin Master Fund, Pinebridge Global Funds, SBI General Insurance and a few mutual funds participated in the anchor book.
 

It also manufactures and supplies piping products, including high-pressure piping systems, piping spools, high frequency induction pipe bends, longitudinally submerged arc welding pipes, industrial pipe fittings, pressure vessels, industrial stacks, modular skids, and accessories including boiler superheater coils, desuperheaters, and other customized components.
 

DEE Development Engineers has seven manufacturing facilities in Palwal, Haryana; Anjar, Gujarat; Barmer, Rajasthan; Numaligarh, Assam; and Bangkok, Thailand, with three manufacturing facilities located in Palwal, Haryana. The company recently expanded into a new business vertical, offering design, engineering, fabrication, and manufacturing of pilot plants at Palwal Facility.
 

DEE Development Engineers reported a net profit of Rs 14.34 crore with a revenue of Rs 380.23 crore for the nine months ended on December 31, 2023. The company’s net profit came in at Rs 12.97 crore with a revenue of Rs 614.32 crore for the financial year 2022-23.
 

The company has reserved shares worth Rs 1 crore for the eligible employees of the company, who will get a discount of Rs 19 per share. It has reserved 50 per cent of the issue for the qualified institutional bidders (QIBs), while non-institutional investors have 15 per cent of the net offer.  Remaining 35 per cent of the net offer shall be allocated towards retail investors.
 

SBI Capital Markets and Equirus Capital are the book running lead managers of the DEE Piping Systems IPO, while Link Intime India is the registrar for the issue. Shares of the company shall be listed on both BSE and NSE with June 26, Wednesday as the tentative date of listing. Here’s what a host of brokerage firms say about the IPO of DEE Development Engineers IPO:
 

Choice Broking

Rating: Subscribe with Caution

DEE Development has reported a consistent growth in the order book with stability in the profitability, for the reported period, being the largest process piping solution provider in India. With favourable macros for the key application sectors, it is well positioned to benefit from the investment growth in application sectors in the medium term, said Choice Broking.
 

“It derives almost half of the business from the oil & gas sector and residual from sectors like power generation, chemicals etc. It is demanding a P/E multiple of 108.1 times, which is at a premium compared to its peers. The reported financial performance doesn’t justify the demanded valuation,” it added with a ‘subscribe with caution’ rating for this issue.
 

Reliance Securities

Rating: Subscribe

DEE Development is one of the key players in process piping solutions, in terms of installed capacity, with a strong focus on automation and process excellence to drive operational efficiencies and offerings to its customers, said Reliance Securities in its IPO note.
 

“DEE’s increasing focus on high margin products with additional contributions from modular skids and usage of high-grade materials, forging technology tie-ups with select global OEMs to derive consistent order flow to become a preferred partner for its clients for the next few years. Hence, we recommend an ‘subscribe’ to the issue,” it said.
 

Canara Bank Securities

Rating: Subscribe

The company specializes in process piping solutions, offering engineering and pre-fabrication services. It operates seven manufacturing facilities in five locations across India and one in Thailand, with a total capacity of 94,500 MTPA. It faces high entry barriers, making it difficult for newcomers to compete. They use automation extensively in their manufacturing process, said Canara Bank Securities.
 

“Although 50 per cent of their revenue comes from exports, which affects margins due to high transportation costs, the industry is expected to grow by 6 per cent from FY23 to FY30. With a strong order book of over 828 crores and a revenue of 545 crores, they have strong medium -to-long-term revenue visibility,” it added with a ‘subscribe’ rating to the IPO with a long-term view.
 

Marwadi Financial Services

Rating: Subscribe

Considering the FY24 annualized EPS of Rs 2.77 on a post-issue basis, the company is going to list at a P/E of 73.33 times with a market cap of Rs 1,401.7 crore, whereas its peer namely ISGEC Heavy Engineering is trading at a P/E of 37.8 times, said Marwadi Financial Services.
 

“We assign a ‘subscribe’ rating to this IPO as the company is a largest player in process piping solutions in India, in terms of installed capacity, providing specialized process piping solutions with strategically located state-of-the-art manufacturing facilities with significant barriers to entry,” it said.
 

Swastika Investmart

Rating: Subscribe

DEE Development Engineers, a leading player in the Indian process piping solutions industry, has exposure to a niche sector with high barriers to entry. It boasts a strong competitive position with established client relationships and a diverse portfolio of specialized offerings. The company benefits from a robust order book and consistent financial performance, said Swastika Investmart.
 

“DEE’s business is susceptible to downturns in the industries it serves, such as oil and gas, power, and chemicals. Additionally, competition from both domestic and international players presents a challenge. DEE’s market leadership, consistent growth trajectory, and strong order book warrant consideration for long-term investors,” it added with a ‘subscribe’ tag for a long term.
 

StoxBox

Rating: Subscribe

DEE Development’s financial performance is likely to be driven by its robust balance sheet, long-standing customer relationships, capacity expansion, higher entry barriers, and strong management team holding impressive backgrounds, said StoxBox in its IPO note.
 

“The issue is valued at a P/E of 56.4 times on the upper price band based on FY24 earnings, which we feel is fairly valued given the strong growth prospectus and stickiness of customers. We, therefore, recommend a ‘subscribe’ rating for the issue,” it added.

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.